Frequently asked questions
Below you will find some of the most frequently asked questions we receive from our clients when handling the purchase or sale of luxury residential property.
- What is the process of purchasing residential property?
- What is the difference between a freehold and leasehold property?
- Can I make alterations to my leasehold property?
- The seller provided a lot of helpful information about the property during my viewing. Do we need to raise questions on those points with their solicitor?
- My property is in a conservation area, what does this mean?
- Should I be concerned with Flood Risk as a buyer?
- What are chancel repairs?
- When should I take out buildings insurance when buying a new home or flat?
- I am thinking of selling my Leasehold Property (usually a flat) - are there any additional requirements?
- What does a no search indemnity policy do?
- What is search indemnity insurance and why is it needed?
- My daughter has recently bought a flat in her own name and wants her boyfriend to move in. Could he have a legal or financial claim on the property if they split?
- When moving house, what information does my solicitor require?
- What is multiple dwellings relief?
- How much SDLT will I have to pay?
- What is the difference between joint tenants and tenants in common?
- I'm selling my property and buying another one, can I use my sale deposit to help with my purchase?
- I have a problem with my new build, who is responsible for helping me?
- What does buying off plan mean?
- I sold my house for profit, do I have to pay tax on it?
What is the process of purchasing residential property?
The process of purchasing a residential property in England & Wales will take the following steps:
1. Deciding to Buy
In the first instance, you must decide how to fund and structure your purchase, and in whose name to register the property. You must also ensure you have cash available to fund the deposit (usually 10% of the purchase price), which will be due on exchange of contracts.
2. Choosing a Property
Once you have found a property you like, you will make an offer on your chosen property through the estate agent and, if accepted, the agent will circulate a memorandum of sale to the solicitors. The memorandum of sale sets out the property details and the terms of the offer (which are not legally binding until contracts are exchanged).
3. Investigating the Title to the Property
Your solicitor will review all documentation sent by the seller's solicitor, including the title to the property, the lease (if relevant), standard replies to enquiries and any other supporting documents. Your solicitor will also submit ‘searches’ to various public authorities including a local authority search, an environmental search, and a drainage and water search. At this stage of the process, it is also recommended that you instruct a surveyor to inspect the physical state of the property and check for any structural defects.
4. Exchange of Contracts
If you are still happy to proceed, you will be asked to sign the contract, send the 10% deposit to your solicitor, and agree a completion date with the seller.
On the day of completion, your solicitor will send the completion funds to the seller’s solicitors and upon receipt, the seller will date the transfer and confirm completion has taken place. The keys will then be released by the agents and you will be the proud owner of your new property.
For more information, please see our A Guide to Buying Residential Property in England & Wales or contact a member of the Residential Property team.
What is the difference between a freehold and leasehold property?
There are two types of property in England & Wales: freehold and leasehold.
- Freehold properties are usually houses. The owner of a freehold property owns the property, the land it sits on and the space above it. While no ground rent or service charge is payable for a freehold property, the maintenance of the building is up to the owner.
- Leasehold properties are generally flats. A leasehold property is held under a lease which is for a finite period of time and which details the terms of ownership. While the owner of the leasehold owns the flat, the landlord (freeholder) owns the land and building. Ground rent and service charge are usually collected by the landlord in order to pay for the maintenance of the building and land. Leases also generally restrict an owner's ability to carry out works to, or sublease, the property.
The process of buying a property is predominantly the same irrespective of the property type, but the conveyancing process for leasehold transactions can carry an extra layer of complexity. Your conveyancer must review (amongst other things) the length of the lease (80 + years is preferable), any unfair ground rent or service charge provisions and any supplemental documents required to register you as the legal owner of the flat with the landlord.
Can I make alterations to my leasehold property?
You will need to check the covenants relating to alterations in your lease and ensure compliance with them.
Usually, leaseholders will be able to carry out internal non-structural alterations to their property but may require landlord's consent to do this. If landlord's consent is required, typically the landlord will not be able to unreasonably withhold consent. When making an application for consent, you will need to provide the landlord with details of the proposals (including drawings and plans, where relevant) and give the landlord a reasonable time to respond. You will also be reasonable for the landlord's fees and other expenses properly incurred in connection with such an application. If consent is granted, this will be documented in a Licence to Alter, which both you and the landlord will be a party to.
The seller provided a lot of helpful information about the property during my viewing. Do we need to raise questions on those points with their solicitor?
Although it is extremely helpful to be given some background information on the property during a viewing, you are only able to rely on information provided in writing by the seller’s solicitors prior to exchange of contracts.
You are not able to rely on any information provided to you by the seller or their agents. It is therefore extremely important that you let your solicitor know of any information provided to you directly, which has influenced your decision to purchase the property, so that formal enquiries can be raised on those points with the seller’s solicitor.
My property is in a conservation area, what does this mean?
Conservation areas exist to protect the special architectural and historic interest of a place – in other words the features that make it unique and distinctive.
Living in a conservation area means that there are severe restrictions in place relating to planning issues, including the following:
- Works to your property: In conservation areas, local authorities often implement special controls (called Article 4 Directions) which restrict the work you can normally do without planning permission, such as replacing a door or window. These controls are tailored to each area by the council and are put in place when there are particular elements of local buildings they want to protect.
- Trees: At least six weeks before you cut down, top or lop any but the smallest trees in a conservation area you must notify your local planning authority. The authority will then consider the contribution the tree makes to the area and if necessary create a Tree Perseveration Order to protect it.
- Permitted Development Rights: Permitted development rights are slightly different in conservation areas compared to other areas. This means that you may need to make planning applications for some forms of development which would not need such applications outside conservation areas. For example, for two-storey extensions or dormer windows.
Should I be concerned with Flood Risk as a buyer?
The Law Society recently updated their practice note in relation to Flood Risk in January 2020, to which it advises that flood risk should be considered in all property transactions and as such, we would always advise that further enquiries and investigations must be carried out as part of our property due diligence.
We would review your building surveyor report and if necessary, instruct a flood risk assessment consultant. Prior to entering into a binding commitment to purchase a property, we would also advise you to check whether the building insurance, including flood risk, is available.
What are chancel repairs?
Chancel repair liability is a legal obligation on some property owners in England and Wales to pay for certain repairs to a church.
The liability to pay for chancel repairs attaches to former rectorial land unless the liability was abolished by statute or substituted for an annuity. A simple check to see whether a property is near a medieval church is not sufficient, and it is not safe to assume that properties in urban areas will necessarily be free from any chancel repair liability. A chancel liability search is therefore carried out to determine whether the property is within the historical boundary of a parish that continues to have a potential chancel repair liability.
When should I take out buildings insurance when buying a new home or flat?
Give yourself the opportunity to survey the market, identify and put in place a buildings insurance policy that works for you by speaking with any existing insurer and your mortgage lender and getting quotes soon after instructing your solicitor on your purchase. You will look after you interests best if you get your buildings insurance ready in good time before exchange of contracts, so that on the day of exchange itself you can confirm the commencement date to your insurance provider rather than trying to deal with insurance in a panic or when feeling under pressure to exchange.
When considering your buildings insurance policy, consider the following:
- If you are buying with a mortgage, buildings insurance will be a condition of the loan in which case your insurance should be in place before exchange of contracts.
- If you are buying a property without a mortgage, the usual position is that the seller is under no obligation to insure the property following exchange of contracts and you must complete your purchase if the property is damaged between exchange and completion. Check with your solicitor what is recorded in your contract on insurance and risk before you exchange contracts and become legally bound to complete the purchase.
- Matters such a flood risk, ground instability and the presence of Japanese Knotweed can affect the insurability of a property and the policy premium. These and similar matters should be identified as part of the investigations carried out by your building surveyor and solicitor prior to exchange of contracts. Check whether there are any matters identified that may affect your buildings insurance and disclose these to your insurance broker or provider before you exchange contracts to avoid any unwelcome surprises.
- If you are buying a leasehold property, the landlord will insure the building. Check with your solicitor before you exchange contracts that appropriate provisions for insurance and risk are recorded in your contract and that you understand them.
- You may wish to consider taking out a home contents insurance policy at the same time as placing your buildings insurance policy if there are any items included in the sale that you want to safeguard against damage between exchange and completion.
I am thinking of selling my Leasehold Property (usually a flat) - are there any additional requirements?
You will need to check the HM Land Registry Property Register (Official Copy) to see whether there are any restrictions noted in the Proprietorship Register e.g. there may be a requirement for a certificate of compliance to be obtained.
In addition, the terms of the lease will need to be reviewed to see what requirements, if any, are specific to your property and need to be complied with such as a Licence to Assign (consent to sell), Deed of Covenant and/or a transfer of Shares in a Management or Freehold company.
What does a no search indemnity policy do?
The risks covered by search indemnity insurance vary between providers, however generally they will cover any loss sustained as a result of adverse entries which would have otherwise been revealed had a search been carried out prior to completion of the transaction. Loss is usually calculated to the value of any financial charge revealed or as a reduction in market value of the property.
Cover is usually conditional upon the buyer having no knowledge of the potential entry and that cover is not available to you under your household insurance policy.
What is search indemnity insurance and why is it needed?
As part of the conveyancing process, solicitors submit ‘searches’ to various public authorities. These searches include (amongst others) a local authority search, an environmental search and a drainage and water search. These searches are used to help solicitors identify potential issues with the property and give an opportunity for the buyer to withdraw or negotiate the price if an adverse result is found.
However, there are a number of circumstances in which a buyer may seek to proceed without the relevant searches. Such circumstances include the following:
- Where there are time constraints and the buyer must complete quickly. Searches usually take around 3 weeks to be returned and sometimes buyers simply do not have the time to wait. With the stamp duty holiday deadline looming we are likely to see this scenario cropping up frequently in March.
- Where there are long delays with the searches. Currently, due to being hacked, Hackney Council have a current turn around of 171 days to return a Local Authority search. Last year Camden Council had similar issues and had a 100 day turn around. In these instances buyers and sellers are not likely to want to delay the transaction whilst waiting for the results.
- Where searches have been obtained relatively recently for the property. This scenario often arises with new build purchases where searches were ordered prior to exchange of contracts, however by the time the construction has finished and the parties are ready to complete, the searches are considered 'out of date'.
In the above circumstances, a cash buyer may decide to proceed either without searches or as an alternative they have the option to purchase a search indemnity policy (i.e. a no search indemnity policy, a delayed search indemnity policy or a search validation indemnity policy).
My daughter has recently bought a flat in her own name and wants her boyfriend to move in. Could he have a legal or financial claim on the property if they split?
Unmarried, cohabiting couples are the fastest-growing type of family. The number of cohabiting couple families continues to grow quicker than married couple and lone parent families, with an increase of over 25% in a decade.
While no one automatically acquires rights in a property just because they live or have lived in it with their partner, there are exceptions and it is important to avoid potential pitfalls.
One risk to be aware of is the way a partner can demonstrate they have acquired an ownership right in the property, i.e. by contributing to the mortgage or to the cost of building work. To circumvent this, any financial contribution should be understood by both parties to be rent and/or towards bills, and not towards the mortgage. Failure to specify could entitle the partner to a proportionate share in the flat.
We would advise that legal advice is sought and a cohabitation agreement is drawn up detailing:
- If the partner is paying rent or a contribution towards costs
- Whether they expect he will acquire a right to occupy the property, or an interest in it
- Who will pay the bills
- What will happen if the partner is requested to move out by the property owner
- Whether furniture will be jointly owned or earmarked as owned by one or other of them.
The cohabitation agreement need not be long and complicated, but it should be clear so that it records what both parties agree to and anticipate.
When moving house, what information does my solicitor require?
Here we outline the information required when moving to a new house, to ensure you are completely prepared.
Works, Tests and Guarantees
- Copies of planning consents, landlord and third-party consents to works (such as Grosvenor/party wall awards)
- Building regulations completion certificates for structural works, new windows, new gas appliances or new water connections
- Electrical installation certificates
- Copies of the architect’s or other professional consultant’s plans for works done
- Guarantees or warranties in relation to damp proof works, central heating installation, wood treatment, electrical wiring, plumbing, new windows and doors, or alternatively any inbuilt kitchen products, air conditioning, sump pumps or sound systems. For new build properties the 10 year new build warranty (if still applicable)
- Gas safety, electrical wiring, fire alarm or burglar test certificates.
Receipted service charge payments, notices from the landlord or correspondence between you and the landlord, particularly in relation to any upcoming works which might require an additional payment. A buyer may want a retention from the purchase price for year-end service charge reconciliation payments.
If you own a leasehold property with a share in the freehold, you will probably have a share certificate. The original is ideally needed to be handed to the buyer on completion.
If you are selling subject to a tenancy, provide this, together with the Tenancy Deposit Scheme Certificate and all information served at the start of the tenancy.
Even if there are no current disputes, and any past disputes were resolved, you are still obliged to disclose these. If there are outstanding property disputes, our property litigation team would be able to advise you.
Anti Money Laundering and Knowing Your Client
Before we can start acting for you we will need to carry out checks on your identity, and if you are buying on your source and proof of funds. Since this can delay issuing papers, do be prepared with a utility bill and a bank statement in your name showing your usual home address, and no older than three months. We will also need a certified copy of your passport.
What is multiple dwellings relief?
This relief will reduce the SDLT payable if an individual buys more than one property at the same time from the same seller. It may be available where a property includes not only a main house but also separate and independent accommodation. For example a “granny annexe” may qualify as a separate dwelling but it has to be self-contained and have independent services. HMRC consider that this relief has been open to abuse and have recently introduced more stringent tests to ensure that the second “dwelling” is truly an individual unit. If applicable it permits the purchase price to be divided by the number of units and for SDLT to be paid on each unit, resulting in a saving from the higher rates of tax.
How much SDLT will I have to pay?
Having once been a simple tax to calculate, SDLT is now very complicated with various nuances. The amount of tax chargeable will depend on whether you own any other residential properties anywhere in the world, or are married or civil partnered to someone who does, whether you are replacing your main residence, whether you are a beneficiary under a property trust or holding on trust for a minor and whether you and whoever you might be buying with is deemed to be UK resident. Given how complex this can be do talk to us about this early on in the process.
What is the difference between joint tenants and tenants in common?
As joint tenants, you own the whole property together, whereas tenants in common each own a separate and distinct share of the property, which may or may not be equal.
I'm selling my property and buying another one, can I use my sale deposit to help with my purchase?
Generally a deposit your solicitor receives for the sale of your house can be used to pay (or go towards) the deposit you have to pay for a related purchase. The deposit must ultimately be held by a firm of solicitors as “stakeholder”, which means it cannot be released to a client, and you will need to ensure your purchase is simultaneous with your sale or occurs later (but not before).
I have a problem with my new build, who is responsible for helping me?
This will depend on a number of factors. Your new build should have come with a ten year new build warranty or possibly a professional consultant’s certificate as well/instead. During the first two years of these policies you would usually approach the developer to address any issues. Ultimately the warranty provider would pay if the developer did not and a resolution service is usually included to try to agree a solution between the owner and the developer.
The warranty would also provide for the return of the deposit pre completion (up to a limit) if the builder becomes insolvent and cannot finish the development.
For the remaining eight years the policy would usually provide cover depending on the nature of the defect. Please note that sometimes elements such as glazing may be excluded or the policy may come with a high excess to pay so it is important to consider the cost of any likely repair.
After this period such matters would usually fall to the landlord to repair and recover under the service charge or through the building insurance depending on the nature of the issue. Generally structural issues will be for the landlord to repair and non structural internal issues would be for you as a tenant of leasehold property to repair.
What does buying off plan mean?
For many, the idea of buying a property means “house hunting” for an established building, falling in love with it, placing an offer, perhaps doing a survey and some other legal checks, and then moving in. However, it is important to remember that other options exist for buyers, including off-plan purchases. Buying off-plan means entering into a contract to purchase a property before that property is built. The contract will specify details of the future property, including size, layout and finished look. Completion of the purchase is conditional upon the property built in accordance with those specifications, in line with the various building regulations and other legal requirements.
I sold my house for profit, do I have to pay tax on it?
You will have to pay capital gains tax on profits made on the sale of a property, unless it is your main home in which case you may well be eligible for private residence relief from capital gains tax.
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